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Hedge Funds Are Dumping OSI Systems, Inc. (OSIS)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards OSI Systems, Inc. (NASDAQ:OSIS).

Is OSI Systems, Inc. (NASDAQ:OSIS) undervalued? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets shrunk by 5 lately. Our calculations also showed that OSIS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding OSI Systems, Inc. (NASDAQ:OSIS).

What does smart money think about OSI Systems, Inc. (NASDAQ:OSIS)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in OSIS a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is OSIS A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Noam Gottesman’s GLG Partners has the largest position in OSI Systems, Inc. (NASDAQ:OSIS), worth close to $3 million, comprising less than 0.1%% of its total 13F portfolio. On GLG Partners’s heels is Gotham Asset Management, managed by Joel Greenblatt, which holds a $2.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of Peter Muller’s PDT Partners, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to OSI Systems, Inc. (NASDAQ:OSIS), around 0.13% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, designating 0.07 percent of its 13F equity portfolio to OSIS.

Due to the fact that OSI Systems, Inc. (NASDAQ:OSIS) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds who were dropping their entire stakes heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the 750 funds followed by Insider Monkey, comprising about $28.5 million in stock. Robert Joseph Caruso’s fund, Select Equity Group, also sold off its stock, about $17.8 million worth. These moves are important to note, as total hedge fund interest was cut by 5 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to OSI Systems, Inc. (NASDAQ:OSIS). These stocks are Park National Corporation (NYSE:PRK), Rambus Inc. (NASDAQ:RMBS), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and EVO Payments, Inc. (NASDAQ:EVOP). This group of stocks’ market values match OSIS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRK 6 8226 -4
RMBS 13 143097 -6
KPTI 21 617463 -3
EVOP 10 32684 -12
Average 12.5 200368 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $13 million in OSIS’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 6 bullish hedge fund positions. OSI Systems, Inc. (NASDAQ:OSIS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately OSIS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OSIS were disappointed as the stock returned 6.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.